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Enhancing Productivity at Collins: Labor and Multifactor Analysis

This case study evaluates the impact of a new computerized title search system on labor and multifactor productivity at Collins. By comparing the old system's productivity metrics to the new system's, the cost-saving potential and efficiency gains are assessed, highlighting the financial implications over the long term. The analysis considers factors such as staff hours, overhead expenses, and output levels to determine the system's effectiveness. Ultimately, the decision on whether the new system justifies its implementation is explored in detail.

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Enhancing Productivity at Collins: Labor and Multifactor Analysis

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  1. Chapter 2 Problem

  2. Productivity Formulas • Productivity = Output Produced / Input Used • Partial Prod. = Output / Labor • Partial Prod. = Output / Machines • Multifactor = Output / Labor + Machines • Multifactor = Output / Labor + Materials • Multifactor = Output / Labor + Capital + energy

  3. Problem • Collins Title wants to evaluate its labor and multifactor productivity with a new computerized title search system. The company has a staff of 4, each working an 8 hour shift (total payroll cost/day = $640/day) with overhead expenses of $400/day. Collings processes 8 titles per day. The new system will allow 14 titles to be completed. With the new system, the staff, hours, and pay are the same. However, the overhead expenses are now $800 / day. • Will the new system save them money over the long run?

  4. Solution • Productivity Old System = 8 titles/32 hours = .25 titles per labor hour • Productivity New System = 14 titles/32 hours= .4375 titles per labor hour • An increase of .4375 - .25 = .1875 more per hour or an increase of 75%. .4375 / .25 = 1.75 or 75%. • Is this enough to justify the new system?

  5. Need more information • Multifactor Productivity Old system 8 titles / $640 + $400 = .0077 titles per dollar. • Multifactor Productivity New System 14 titles / $640 + $800 = .0097 titles per dollar. • Multifactor productivity increases from .0077 to .0097 or 26% increase .0097 / .0077 = 1.26. • Is it worth it?ookl8

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